2018 (9) TMI 314 - AT - Service Tax

Waiver of penalty u/s 76 and 78 - case of Revenue is that Commissioner (Appeals) has appropriated the Service Tax and interest paid by the assessee, but has failed to appreciate the fact that it was only on the basis of observation of Audit that non-payment of Service Tax came to light - Held that - The respondent did not pay the Service Tax even after the decision of Hon ble High Court of Bombay in the case of Indian National Ship Owners Association 2009 (3) TMI 29 - BOMBAY HIGH COURT , and it was only when the Audit pointed out in July, 2012, the respondent paid the Service Tax - invocation of Section 76 is justified. Penalty u/s 76 justified - appeal allowed in part.

Summary

Issues:
1. Waiver of penalty under Section 76 and 78 of the Finance Act, 1994.
2. Invocation of Section 80 of the Finance Act, 1994.
3. Applicability of penalty under Section 76.

Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner (Appeals) waiving penalties under Section 76 and 78 of the Finance Act, 1994. The Revenue argued that the penalties were wrongly waived by invoking Section 80 of the Act. The Revenue contended that the non-payment of Service Tax was detected by an audit observation, and had the audit not detected it, the respondent would have evaded the tax. The Revenue highlighted the period of demand from 2006 to 2011 and emphasized that the respondent's failure to pay Service Tax until January 2012, when pointed out by the audit, justified the imposition of penalties under Section 76. The Revenue stressed that the decision of the High Court clarified the liability to pay Service Tax, making the respondent's non-payment until the audit's detection sufficient to invoke penalties under Section 76.

2. The respondent argued that the situation was revenue-neutral as they had availed CENVAT Credit of the tax paid and thus had no intention to evade payment. The respondent further contended that they promptly paid the entire Service Tax along with interest upon the audit's notification, making the imposition of penalties under Section 76 unjustified. The respondent opposed the invocation of Section 78, citing their compliance with tax payment and credit availing.

3. The Tribunal acknowledged that the respondent had indeed availed CENVAT Credit of the Service Tax paid, indicating no intention to evade payment. However, the Tribunal noted that despite the High Court's decision clarifying the liability to pay Service Tax from a specific date, the respondent failed to pay until the audit highlighted the non-payment in July 2012. Consequently, the Tribunal found the invocation of penalties under Section 76 justified and partially allowed the appeal, setting aside the waiver of penalties under Section 76 and invoking Section 80 of the Finance Act, 1994.

This comprehensive analysis of the judgment addresses the issues of penalty waiver, the invocation of relevant sections of the Finance Act, and the justification for imposing penalties under Section 76 based on the specific circumstances of the case.